Strength Seen in Seagate (STX): Can Its 7.7% Jump Turn into More Strength?

Seagate (STX) shares rallied 7.7% in the last trading session to close at $211.12. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 26.9% gain over the past four weeks.

The increase in share price can be attributed to the recent launch (September 15) of the LaCie Rugged SSD4, a compact external solid-state drive designed for creators working beyond the confines of a traditional studio. Designed for filmmakers, photographers, and audio professionals who demand reliable, high-performance storage, the Rugged SSD4 offers blazing speeds of up to 4000MB/s read and 3800MB/s write. Its USB 40Gbps port enables fast file transfers and seamless direct work from the drive across Mac, iPad, PC, and mobile devices.

Higher demand for mass capacity storage solutions, as well as expansion into SSD storage space, remain tailwinds. Seagate is witnessing mass capacity demand improvement, with nearline cloud demand picking up pace. In the last reported quarter, mass capacity revenues surged 40% year over year to $2 billion, owing to stronger nearline cloud demand and increasing nearline enterprise sales.

In the June quarter, nearline drives accounted for 91% of the total mass capacity exabytes shipped. Cloud investment cycles and the scale-out of AI-ready data center infrastructure is driving strong demand for mass-capacity storage. Also, cloud service providers are focusing more on the development and deployment of AI applications while building cloud infrastructure. Seagate believes HDDs will play a key role in enabling these stages of the AI adoption curve and expects HDD demand to pick up pace going forward.

This electronic storage maker is expected to post quarterly earnings of $2.33 per share in its upcoming report, which represents a year-over-year change of +47.5%. Revenues are expected to be $2.52 billion, up 16% from the year-ago quarter.

While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For Seagate, the consensus EPS estimate for the quarter has been revised 3.3% higher over the last 30 days to the current level. And a positive trend in earnings estimate revision usually translates into price appreciation. So, make sure to keep an eye on STX going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Seagate is a member of the Zacks Computer - Integrated Systems industry. One other stock in the same industry, IonQ, Inc. (IONQ), finished the last trading session 6.3% higher at $59.11. IONQ has returned 38.2% over the past month.

IonQ's consensus EPS estimate for the upcoming report has changed -29.7% over the past month to -$0.24. Compared to the company's year-ago EPS, this represents no change. IonQ currently boasts a Zacks Rank of #3 (Hold).

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This article originally published on Zacks Investment Research (zacks.com).

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